Consumer Payment Trends in the U.S

Businesses routinely seek to appeal to consumers by understanding which goods or services they want to buy. But understanding how shoppers prefer to buy—that is, which forms of payments they favor, and why—is also critically important. Marketers, retailers, card associations and other product and service providers hope to make transactions easy and convenient for consumers, but they must also balance these requirements against their own needs. Meanwhile, in the post-recession U.S. marketplace the world of payments keeps evolving as consumers back away from credit cards, debit cards move toward saturation, online payment options proliferate, and contactless payments and mobile payments move closer on the horizon.

This all-new report from Packaged Facts examines consumer payment forms of all kinds, including credit cards, debit cards, gift/prepaid cards, cash, checks, online payment and emerging forms, with a focus on how consumer preferences have changed during the past five years and vis-à-vis the economic downturn and recovery. It includes:
• Analysis of how Americans’ financial outlook influences their spending and payment preferences.
• Demographic and psychographic profiling by payment form and consumer age, gender, race, geographic region, income, educational level, etc.
• Focus chapter on cash, whose straightforwardness and immediacy makes it the payment choice of more than half of U.S. adults.
• Focus chapter on checks, which despite declining usage remain popular for bill paying and are getting new legs via “digital reinvention.”
• Focus chapter on credit cards, which have reached saturation and face other challenges including more restrictive legislation and declining usage among consumers looking to reduce their debt.
• Focus chapter on debit cards, which continue to win followers but whose rise may be diverted by laws restricting overdraft fees.
• Coverage of gift cards and other prepaid debit cards, which are creating a fast-growing “second-tier” banking system for those without access to traditional banks.
• Focus chapter on new payment methods, including contactless, cell phone and Internet-based, all of which are jockeying for position in the next wave of payment forms.
Myriad data sources include primary data compiled by Experian Simmons and cross-tabulated by Packaged Facts to create customized profiles of those consumers shaping the U.S. payments industry now and into the future.

Chapter 1: Executive Summary
Scope of Report
Methodology
Check Remains Most Popular Form of Bill Payment
Table 1-1: Mode of Bill Payment, 2009 (percent of U.S. adults and number in millions)
Debit Cards Lead in Non-Cash Transactions
Electronic Payment Share at 63%
Government Study Confirms Market Directions
Cash: Still Preferred by Over Half of Adults Making Purchases
Checks: Also Still in Use by Over Half of Americans
Credit Cards: Over Half of Americans Are Regular Users
Debit Cards: Popularity Still Rising, But at Slower Rate
Gift Cards, Prepaid Debit Cards, and Money Orders
Online Payments
Figure 1-1: Percentage of U.S. Adults Who Used Online Banking in Last 30 Days, 2004-2009
Spending Attitudes and Economic Sentiment
A Stuttering Recovery
Economic Downturn Dampens Americans’ Sense of Financial Security
Table 1-2: Percentage of U.S. Adults Who Agree or Disagree with the Statement: “I Feel Secure Financially,” 2004-2009
Attitudes Toward Economy and Individual Financial Situation
Financially Secure Big on Credit, Checks
Figure 1-2: Payment Preferences Among the Financially Secure, 2009 (index)
Financially Insecure Lean Toward Money Orders, Debit

Chapter 2: Market Overview
Introduction
Scope of Report
Methodology
Payment Trend Overview
Check Remains Most Popular Form of Bill Payment
Table 2-1: Payment Preferences in the U.S., 2009 (percent of U.S. adults and number in millions)
Table 2-2: Mode of Bill Payment, 2009 (percent of U.S. adults and number in millions)
Debit Cards Lead in Non-Cash Transactions
Figure 2-1: Percentage of U.S. Non-Cash Payment Transactions: By Type, 2009
BAI/Hitachi Study Places Electronic Payment Share at 63%
Government Study Confirms Market Directions
Figure 2-2: Percentage Share of Non-Cash Payments: By Type, 2003 vs. 2006
Cash: Still Preferred by Over Half of Adults Making Purchases
Table 2-3: Percentage of U.S. Adults Who Agree with the Statement: “I Often Prefer to Pay Cash for the Things I Buy,” 2004-2009
Checks: Also Still in Use by Over Half of Americans
Figure 2-3: Percentage of U.S. Adults Who Have a Checking (Interest or Non-Interest) or Check Guarantee Card, 2004-2009
Credit Cards: Over Half of Americans Are Regular Users
Table 2-4: Credit Card Ownership and Usage: By Frequency, 2004- 2009 (percent)
Debit Cards: Popularity Still Rising, But at Slower Rate
Table 2-5: Debit Card Ownership and Usage, 2004-2009 (percent)
Gift Cards, Prepaid Debit Cards, and Money Orders
Figure 2-4: Percentage of Debit Card Users: Banked vs. Unbanked, 2009
Figure 2-5: Percentage of U.S. Adults Who Have Sent Money Within
the U.S. in the Last 12 Months, 2004-2009
Online Payments
Figure 2-6: Percentage of U.S. Adults Who Used Online Banking in Last 30 Days, 2004-2009
Spending Attitudes and Economic Sentiment
The Villains of the Crisis
A Stuttering Recovery
Economic Downturn Dampens Americans’ Sense of Financial Security
Table 2-6: Percentage of U.S. Adults Who Agree or Disagree with the Statement: “I Feel Secure Financially,” 2004-2009
Figure 2-7: Percentage of U.S. Adults Who Agree with the Statement: “I Don’t Like the Idea of Being in Debt,” 2004-2009
Attitudes Toward Economy and Individual Financial Situation
Figure 2-8: Expected Forms of Consumer Payment During Holiday Season, 2009 (percent)
Financial Situation Sentiments by Demographics
Figure 2-9: Percentage of U.S. Adults Who Feel Better or Worse Off
Financially Compared with 12 Months Ago, 2009
Age
Race
Income Levels
Education
Geographic Region
Marital Status and Children in Household
Impulse Shoppers and Informed Consumers
Consumer Financial Outlook Impact on Payment Preferences
Financially Secure Big on Credit, Checks
Figure 2-10: Payment Preferences Among the Financially Secure, 2009 (index)
Financially Insecure Lean Toward Money Orders, Debit
Figure 2-11: Payment Preferences Among the Financially Insecure, 2009 (index)
Responsible Spenders
Figure 2-12: Payment Preferences Among Responsible Spenders, 2009 (index)
Poor Savers and Careless Spenders
Figure 2-13: Payment Preferences Among Careless Spenders, 2009 (index)
Confident Consumers
Table 2-7: Payment Forms by Level of Consumer Confidence: Low vs. High, 2009 (index)
Payment Preferences by Demographics
Age
Table 2-8: Likelihood of Preferring Payment Forms: By Type and Age Group, 2009
Young Adults and Teens Picking Up Plastic
Gender
Race
Table 2-9: Likelihood of Preferring Payment Forms: By Type and Race/Ethnicity, 2009
Geography
Education
Table 2-10: Likelihood of Preferring Payment Forms: By Type and Level of Educational Attainment, 2009
Income
Table 2-11: Likelihood of Preferring Payment Forms: By Type and Household Annual Income, 2009

Chapter 3: Cash
Introduction
Cash Is Elemental
Almost 0 Billion of U.S. Cash in Circulation
Older and Less Wealthy Americans Prefer Cash
Table 3-1: Cash Usage for Purchases or Bill Payment by Demographic, 2009 (index)
Cash Preferred by Both Financially Secure and Insecure
Table 3-2: Cash Usage for Purchases or Bill Payment by Level of
Financial Security, 2009 (index)
Cash‘s Popularity Difficult to Gauge
ATM Transactions Declining
Figure 3-1: Monthly Number of ATM Transactions Per ATM in the U.S., 1996-2008
Figure 3-2: Total Number of U.S. ATM Transactions, 1996-2008 (in billions)
Figure 3-3: Number of ATM Machines in the U.S., 1996-2008
Blame It on Debit Cards
Traveling Away from Cash
“Cash Only” Signs and Cash Discounts
A Second Coming of Cash
Turning to Cash in Hard Times
Calls to Redesign the Dollar

Chapter 4: Checks
Paper Checks Holding Out in Digital Age
Table 4-1: Number and Value of Checks Collected by Federal Reserve Banks, 1920-2003 (in millions of dollars and numbers)
The Fed’s Role in Check Processing
Figure 4-1: Number of Checks Paid in the United States: 2001, 2003 and 2006 (number in billions)
Electronic Checking Through ACH
Table 4-2: Percentage Share Distribution of Non-Cash Payments: By Type, 2003 vs. 2006
The Demographics of Check Writers
Table 4-3: Check Usage by Demographic, 2009 (index)
Responsible Spenders Use Checks
Table 4-4: Likelihood of Check Usage by Financial Attitudes, 2009 (index)
Checks Rare in the Retail Environment
Figure 4-2: Checks’ Share of Consumers’ Holiday Payment Methods, 2007-2009 (percent)
Overdrawn Checking Accounts a Cash Cow for Banks
Figure 4-3: Growth in Average NSF Charges, Fall 1998-Fall 2009
The Unbanked Rely on Check-Cashing Outlets
Looking Ahead: Digitalizing Deposits

Chapter 5: Credit Cards
The Rise of the Credit Card
Figure 5-1: Share of U.S. General-Purpose Debit, Credit and Charge Card Purchase Volume, 2008 (percent)
Figure 5-2:

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